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    Analysing Business Markets

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    Ragulan
    Organizational buying involves a decision-making process where organizations identify, evaluate and select products and suppliers to meet their needs. Business markets differ from consumer markets in several key ways: fewer but larger buyers, close supplier-customer relationships, professional purchasing, multiple influencers in buying decisions, and derived demand tied to consumer goods. The business purchasing process involves 8 stages: 1) recognizing a problem or need, 2) describing general needs, 3) specifying products, 4) searching for suppliers, 5) soliciting proposals, 6) selecting suppliers, 7) ordering and specifying details, and 8) reviewing performance. Multiple individuals and groups within a company's "buying center" participate in and influence the purchasing decision. Business

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    Analysing Business Markets

    Uploaded by

    Ragulan
    4K views5 pages
    Organizational buying involves a decision-making process where organizations identify, evaluate and select products and suppliers to meet their needs. Business markets differ from consumer markets in several key ways: fewer but larger buyers, close supplier-customer relationships, professional purchasing, multiple influencers in buying decisions, and derived demand tied to consumer goods. The business purchasing process involves 8 stages: 1) recognizing a problem or need, 2) describing general needs, 3) specifying products, 4) searching for suppliers, 5) soliciting proposals, 6) selecting suppliers, 7) ordering and specifying details, and 8) reviewing performance. Multiple individuals and groups within a company's "buying center" participate in and influence the purchasing decision. Business

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    Notes on analyzing business markets

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    Organizational buying involves a decision-making process where organizations identify, evaluate and select products and suppliers to meet their needs. Business markets differ from consumer markets in several key ways: fewer but larger buyers, close supplier-customer relationships, professional purchasing, multiple influencers in buying decisions, and derived demand tied to consumer goods. The business purchasing process involves 8 stages: 1) recognizing a problem or need, 2) describing general needs, 3) specifying products, 4) searching for suppliers, 5) soliciting proposals, 6) selecting suppliers, 7) ordering and specifying details, and 8) reviewing performance. Multiple individuals and groups within a company's "buying center" participate in and influence the purchasing decision. Business

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    4K views5 pages

    Analysing Business Markets

    Uploaded by

    Ragulan
    Organizational buying involves a decision-making process where organizations identify, evaluate and select products and suppliers to meet their needs. Business markets differ from consumer markets in several key ways: fewer but larger buyers, close supplier-customer relationships, professional purchasing, multiple influencers in buying decisions, and derived demand tied to consumer goods. The business purchasing process involves 8 stages: 1) recognizing a problem or need, 2) describing general needs, 3) specifying products, 4) searching for suppliers, 5) soliciting proposals, 6) selecting suppliers, 7) ordering and specifying details, and 8) reviewing performance. Multiple individuals and groups within a company's "buying center" participate in and influence the purchasing decision. Business

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    of 5

    Business Markets and Business Buyer Behavior

    What is Organizational Buying?

    Organizational buying is the decision-making process by which formal organizations


    establish the need for purchased products and services and identify, evaluate, and choose
    among alternative brands and suppliers

    The Business Market versus the Consumer Market

    The business market consists of all the organizations that acquire goods and services
    used in the production of other products or services that are sold, rented, or supplied to
    others.

    Business marketers face many of the same challenges as consumer marketers. In


    particular, understanding their customers and what they value is of paramount importance
    to both.

    Business marketers, however, have several characteristics that contrast sharply with those
    of consumer markets.

    •Fewer, larger buyers. The business marketer normally deals withy far fewer,. Much
    larger buyers than the consumer marketer does, particularly in such industries as
    aircraft engines and defense weapons.

    •Close supplier-customer relationship. Because of the smaller customer base and the
    importance and power of the larger customers, suppliers are frequently expected to
    customize their offerings to individual business customer needs.

    •Professional purchasing. Business goods are often purchased by trained purchasing


    agents, who must follow their organizations’ purchasing policies, constraints and
    requirements. Many of the buying instruments for example, requests for quotations,
    proposals, and purchase contracts – are not typically found in consumer buying.

    •Multiple buyinginfluences. Most people typically influence business buying


    decisions. Buying committees consisting of technical experts and even senior
    management are common in the purchase of major goods.

    •Multiple Sales calls- More call to complete an average sale

    •Deriveddemand. The demand for business goods is ultimately derived from the
    demand for consumer goods. For this reason, the business marketer must closely
    monitor the buying patterns of ultimate consumers.
    Business Buying Situations

    Business buyers in companies, institutions, and government organizations face many


    decisions in the course of making a purchase. The number of decisions depends on the
    type of buying situation.

    •Straightrebuy: The straight rebuy is a buying situation in which the purchasing


    department reorders on a routine basis (e.g. office supplies, bulk chemicals). The
    buyer chooses from suppliers on an “approved list.” These suppliers make an effort to
    maintain product and service quality.

    •Modified rebuy: The modified rebuy is a situation in which the buyer wants to modify
    product specifications, prices, delivery requirements, or other terms. The modified
    rebuy usually involves additional decision participants on both sides.

    •New task: The new task is a buying situation in which a purchaser buys a product or
    service for the first time (e.g., office building, new security system). The greater the
    cost or risk, the larger the number of decision participants and the greater their
    information gathering and therefore the longer the time to decision completion

    Participants in the Business Buying Process

    The Buying Center


    Webster and Wind call the decision-making unit of a buying organization the buying
    center. The buying center is composed of “all those individuals and groups who
    participate in the purchasing decision-making process. They are

    •Initiators: People who request that something be purchased, including users or others.

    •Users: Those who will use the product or service; often, users initiate the buying proposal
    and help define product requirements.

    •Influencers: People who influence the buying decision, including technical personnel. They
    often help define specifications and also provide information for evaluating alternatives.

    •Deciders: Those who decide on product requirements or on suppliers.

    •Approvers: People who authorize the proposed actions of deciders or buyers.

    •Buyers: People who have formal authority to select the supplier and arrange the purchase
    terms, including high-level managers. Buyers may help shape product specifications, but
    their major role is selecting vendors and negotiating.

    •Gatekeepers: People who have the power to prevent sellers or information from reaching
    members of the buying center; examples are purchasing agents, receptionists, and
    telephone operators.
    Major Influences on Business Buying

    Business buyers respond to four main influences: environmental, organizational,


    interpersonal, and individual.

    Environmental Factors
    Within the macroenvironment, business buyers pay close attention to numerous economic
    factors, including interest rates and levels of production, investment, and consumer
    spending.

    Business buyers also actively monitor technological, political-regulatory, and competitive


    developments.

    For example, environmental concerns can cause changes in business buyer behavior. A
    printing firm might favor suppliers that carry recycled papers or use environmentally safe
    ink.

    Organizational Factors
    Every organization has specific purchasing objectives, policies, procedures,
    organizational structures, and systems. Questions such as these arise how many people
    are involved in the buying decision,
    •who are they?
    •What are their evaluative criteria?
    •what are the companies policies?

    Interpersonal Factors
    Buying centers usually include several participants with differing interests, authority,
    status, and empathy. Therefore, successful firms strive to find out as much as possible
    about individual buying center participants and their interaction and train sales personnel
    and others from the marketing organization to be more attuned to the influence of
    interpersonal factors.

    Individual Factors
    Each buyer carries personal motivations, perceptions, and preferences, as influenced
    by the buyer’s age, income, education, job position, personality, attitudes toward risk,
    and culture .

    Eg- Young and traditional buyers

    Cultural Factors
    Savvy marketers carefully study the culture and customs of each country or region
    where they want to sell their products, to better understand the cultural factors that
    can affect buyers and the buying organization.

    The Business Purchasing Process

    Stage 1: Problem Recognition


    The buying process begins when someone in the company recognizes a problem or need
    that can be met by acquiring a good or service. The recognition can be triggered by
    internal or external stimuli.

    Eg - Internally, problem recognition commonly occurs when a firm decides to develop a


    new product and needs new equipment and materials, Externally, problem recognition
    can occur when a buyer gets new ideas at a trade show, sees a supplier’s ad, or is
    contacted by a sales representative offering a better product or a lower price. For their
    part, business marketers can stimulate problem recognition by direct mail, telemarketing,
    effective Internet communications, and calling on prospects.

    Stage 2: General Need Description


    Once a problem has been recognized, the buyer has to determine the needed item’s
    general characteristics and the required quantity.

    Stage 3: Product Specification


    With a general need description in hand, the buying organization can develop the item’s
    technical specifications.

    Stage 4: Supplier Search


    The buyer now tries to identify the most appropriate suppliers, by examining trade
    directories, doing a computer search, phoning other firms for recommendations, scanning
    trade advertisements, and attending trade shows.

    Stage 5: Proposal Solicitation


    In this stage, the buyer is ready to invite qualified suppliers to submit proposals. When
    the item is complex or expensive, the buyer will require a detailed written proposal from
    each qualified supplier. After evaluating the proposals, the buyer will invite a few
    suppliers to make formal presentations.

    Stage 6: Supplier Selection


    Before selecting a supplier, the buying center will specify desired supplier attributes
    (such as product reliability and service reliability) and indicate their relative importance.
    It will then rate each supplier on these attributes to identify the most attractive one.

    Stage 7: Order-Routine Specification


    After selecting suppliers, the buyer negotiates the final order, listing the technical
    specifications, the quantity needed, the delivery schedule, and so on.

    Stage 8: Performance Review


    In the final stage of the buying process, the buyer periodically reviews the performance
    of the chosen supplier(s).

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